The Eighth US Circuit Court of Appeals' decision on the state regulation of VoIP upheld a lower court's ruling against the Public Utilities Commission, and is supported by the rules on the matter issued by the Federal Communications Commission last month.

In a case with implications for the entire industry, the FCC ruled in November that Vonage Holdings Corp's DigitalVoice service should not be subject to traditional state public utility regulation.

In a statement, the FCC explained that: "Acting on a petition from Vonage seeking federal preemption of an order by the Minnesota Public Utilities Commission, the FCC found that the company's DigitalVoice service cannot practically be separated into intrastate and interstate components, precluding dual state and federal regulatory regimes. DigitalVoice customers can use their phones from a broadband connection anywhere in the world, making it difficult to determine whether a call is local, interstate or international in nature."

It went on to add that:

"The Commission's order does not express an opinion about the applicability to Vonage of general laws in Minnesota governing taxation, fraud, commercial dealings, marketing, advertising and other business practices. But the Commission expects states to continue playing a vital role in protecting consumers from fraud, responding to complaints, and enforcing fair business practices."